Naphtha Prices Show Consistent Decline Amidst Decrease in Spot Market Purchases

The decline in global Naphtha prices was driven by a reduction in demand from both the downstream market and domestically and globally. Despite an increase in crude oil prices, Naphtha prices experienced a downward trajectory. During the week ending on April 12, 2024, Naphtha markets around the world displayed distinct trends, reflecting the interplay of different factors influencing pricing dynamics.

In the German Naphtha market, there was a notable decline of 1%, with prices decreasing from USD 690/MT to USD 683/MT with the week ending on 12th April. This decline occurred despite a global uptick in crude oil prices, indicating relative quietness in the market, albeit with an overall upward trend. Low bidding activities were prevalent during the week, potentially attributed to ample inventories for domestic use. Additionally, European Gasoline refining margins slightly decreased during this period. Despite European crude oil closing slightly higher, the European Central Bank chose to maintain interest rates steady, hinting at a potential future rate cut amid uncertainty surrounding the U.S. Federal Reserve's actions. The primary drivers of the price decline were observed downstream, particularly in Benzene, Propylene, and Paraxylene markets, which experienced decreases leading to reduced demand from the downstream market and consequent negative impacts on Naphtha prices.

Conversely, in South Korea, Naphtha prices remained stable with no significant fundamental changes observed. Despite a global increase in crude oil prices, Naphtha prices exhibited an steady trend. Low biddings were prevalent, likely due to ample inventories available for domestic use. Refiners, shippers, and other industries remained cautious due to potential fallout from heightened tensions in the Middle East following recent missile and drone strikes by Iran against Israel. In the downstream market, Ethylene prices remained stable, while Benzene, Propylene, and Toluene prices rose, indicating heightened demand from downstream sectors. The toluene, benzene, and propylene markets continued to climb, buoyed by fluctuating international crude oil prices at elevated levels. Additionally, maintenance plans for toluene plants forthcoming week were anticipated to contribute to a decline in toluene supply.

In the US market, prices remained steady despite an increase in commercial crude oil inventories. This stability occurred amidst geopolitical tensions but limited bids and offers remain the primary reason for stability in the market trend. Early indications suggested that certain oil-producing nations might boost output to gain a larger share of the global crude oil supply market. Despite an overall increase in global crude oil prices, the petrochemical sector continued to demand higher volumes of Naphtha, albeit at a slower rate.

Meanwhile, the Naphtha market in Saudi Arabia demonstrated resilience, maintaining stability despite escalation in crude oil prices. Despite these macroeconomic factors, the downstream market for toluene, ethylene, and propylene remained steady, contributing to the overall stability of the Saudi Arabian Naphtha market. This stability was attributed to subdued demand both domestically and internationally, along with minimal bidding activities. The combination of these factors acted as stabilizing forces, preventing significant fluctuations in Naphtha prices during the week.

According to ChemAnalyst, Naphtha prices are anticipated to increase due to the ongoing rise in crude oil prices in the upstream market. The market will experience disruptions stemming from tensions between Iran and Israel, which have instilled fear among market participants. Additionally, declining inventory levels and an increase in demand are expected in the coming weeks, further contributing to the projected price incline.